Firm Dynamics and COVID-19 Crisis: An Empirical Approach

Abstract

The COVID-19 pandemic has significantly disrupted the operations of Small and Medium Sized Enterprises (SMEs) worldwide, posing unprecedented challenges. This thesis investigates the dynamics of SMEs in Georgia during the pandemic, focusing on the effects of government policies aimed at mitigating these impacts. Employing a stage-based identification strategy, this study provides a novel analysis of policy effects on SME closures and new openings. The results indicate that government policies effectively reduced closure rates by 15%, demonstrating their role in supporting business continuity. However, these policies also resulted in a 20% decrease in new SME openings, highlighting a critical trade-off between preserving existing businesses and encouraging new ventures. This nuanced understanding of policy impacts offers valuable insights for future crisis management strategies to enhance SME resilience.